Disguised remuneration and APNs

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Disguised remuneration schemes are tax arrangements that seek to pay individuals through loans or similar structures rather than salary. HMRC considers these schemes ineffective and continues to challenge them. Many users of these arrangements now face Accelerated Payment Notices or follower notices requiring immediate payment. Understanding your position and responding correctly is essential to avoid penalties and further enforcement action.

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At a glance

HMRC continues to investigate historic and current disguised remuneration schemes. Users may receive Accelerated Payment Notices, follower notices or loan charge assessments. We advise clients on their rights, the payment obligations under these notices and the best way to resolve disputes with HMRC. If you have received a notice or enquiry, we can help you today.

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What is a disguised remuneration scheme?

A disguised remuneration scheme is an arrangement designed to provide an individual with funds in a form that is claimed not to be taxable as employment income. Common examples include contractor loan schemes, offshore trusts, employee benefit trusts and arrangements where payments are made as loans rather than salary.

HMRC takes the view that these arrangements do not work and that the payments should be taxed as income. As a result, HMRC has continued to challenge these schemes and has issued substantial tax assessments across many years.

Summary: Disguised remuneration schemes aim to provide untaxed income and are actively challenged by HMRC.

Why is HMRC challenging disguised remuneration arrangements?

HMRC believes that these arrangements create an unfair tax advantage and has introduced a series of measures to counter them. These include targeted anti avoidance legislation, the loan charge and powers to issue combination notices such as Accelerated Payment Notices and follower notices.

HMRC has made it clear that it expects taxpayers to settle liabilities linked to disguised remuneration schemes. Many enquiries relate to historic arrangements implemented years before.

Summary: HMRC challenges disguised remuneration because it considers these schemes ineffective and contrary to tax law.

What is the loan charge and how does it apply to historic schemes?

The loan charge applies to certain outstanding loans connected to disguised remuneration schemes as at 5 April 2019. Instead of treating these loans as genuine debts, the loan charge treats the full amount as income in a single tax year. This can result in a significant tax liability.

Although the legislation has evolved, many individuals continue to face enquiries or settlement discussions relating to earlier schemes and may still be affected by historic positions.

Summary: The loan charge treats outstanding scheme loans as taxable income and can create a significant tax bill.

What types of schemes are affected by HMRC enquiries?

HMRC enquiries cover a range of arrangements, including contractor loan schemes, offshore trusts and employee benefit trusts. Remuneration trust structures have also been subject to challenge. Although each scheme differs in detail, HMRC’s view is that the payments are taxable as employment income.

Many schemes were promoted to contractors, consultants, company directors and owner managed businesses. HMRC continues to review these cases and raise assessments where it considers that tax is due.

Summary: Contractor loan schemes, trusts and similar arrangements are all within HMRC’s disguised remuneration enquiries.

What is an Accelerated Payment Notice (APN)?

An Accelerated Payment Notice is a statutory notice requiring you to pay the disputed tax upfront, before the underlying dispute is resolved. APNs are commonly issued in cases involving disguised remuneration. They remove the cash flow benefit of delaying payment during an enquiry.

An APN requires payment within a fixed period. It is not possible to appeal the tax charge through the APN process itself. The legislation requires payment first, with any dispute resolved separately.

Summary: An APN requires upfront payment of the disputed tax even while the underlying dispute continues.

What must you do when you receive an APN?

You must read the notice carefully and note the deadline for payment. You can make written representations within 90 days if you believe the APN has been issued incorrectly or if there is an error in the amount. HMRC will consider the representations and confirm its decision.

If no payment is made, HMRC may take recovery action. This can include enforcement steps that affect bank accounts, credit position and business cash flow.

Summary: APNs must be dealt with quickly, with representations made within 90 days where appropriate.

Can you appeal an APN or challenge the amount?

APNs cannot be appealed in the usual sense. The underlying tax dispute can be appealed, but the obligation to pay under the APN remains. Representations may only be made on limited grounds, such as factual inaccuracies or errors in calculation.

It is important not to ignore an APN. The payment deadline still applies and HMRC may begin recovery action if it is missed.

Summary: APNs cannot be appealed, but limited representations can be made and should be submitted promptly.

What is a follower notice and how does it differ from an APN?

A follower notice is issued where HMRC believes that your tax arrangement is similar to one that has already been decided in HMRC’s favour by the courts. The notice requires you to amend your return or settle the dispute in line with that decision. Failure to comply with a follower notice can lead to penalties.

An APN, by contrast, is a demand for payment of the disputed tax. It does not require you to change your return. In many cases HMRC issues both notices together.

Summary: A follower notice requires you to change your tax position, while an APN requires payment of the disputed tax.

What are the consequences of not paying an APN or follower notice?

HMRC can pursue enforcement action if an APN or follower notice is not paid or complied with. This may involve debt collection proceedings, additional penalties, interest and, in serious cases, insolvency action.

Ignoring notices increases the risk of further intervention and can make it harder to negotiate a reasonable settlement.

Summary: Failure to pay or comply can lead to penalties and enforcement action.

How can you resolve a disguised remuneration dispute with HMRC?

Resolution options depend on your circumstances. These may include paying the APN, negotiating a time to pay arrangement, appealing the underlying tax assessment or considering whether to settle with HMRC. The appropriate route depends on the structure of the scheme, the tax years involved and the evidence available.

Engaging early with HMRC can help reduce penalties and clarify the best route to a fair outcome.

Summary: Disguised remuneration disputes can be resolved through payment, settlement, appeal or time to pay arrangements.

How does FWJ help clients facing APNs and disguised remuneration enquiries?

We help clients understand their liability, respond to APNs and follower notices, prepare representations and manage engagement with HMRC. We also advise on settlement options and appeals where appropriate. Our aim is to provide clear, practical advice that protects your position and supports a fair outcome.

Summary: FWJ provides experienced guidance on APNs, follower notices and all forms of disguised remuneration disputes.

Our expert tax defence team

Our tax defence team brings extensive HMRC experience and a strong track record in resolving complex and high-risk tax disputes.

• Andy Lynch. Andy is an expert on a wide range of HMRC claims and before joining FWJ, he spent 18 years at HM Customs & Excise in their National Investigation Service. His experience is unrivalled in all types of HMRC claims including HMRC investigation defence, VAT claims, R&D tax credit defence, Account Freezing Orders, Tax Disclosure, Code of Practice 8 & 9 claims, winding up petition defence and much more.
• Stephen Downie. Stephen is a Partner and a former ACCA accountant who combines financial expertise with deep legal knowledge to deliver clear, commercial advice. He acts for directors, shareholders, insolvency practitioners and private clients in corporate governance disputes, director disqualification defence, and HMRC-related claims including tax avoidance schemes, PLNs, VAT and PAYE security demands. His focus is always on achieving the best outcome for clients as efficiently and cost-effectively as possible.
• Anita Sharma. Anita is a Senior Associate specialising in tax litigation and financial disputes with HMRC. She advises high-net-worth individuals and major commercial clients on appeals against HMRC decisions, complex tax assessments, and enforcement proceedings. Anita has secured interim relief following HMRC revocations to keep clients trading during appeals and is known for achieving practical, results-focused outcomes in high-value disputes.
• Connor Coombs. Connor is a Paralegal in the tax team assisting on a broad range of HMRC investigation and defence matters. He supports clients with Code of Practice 8 and 9 investigations, time-to-pay arrangements, HMRC statutory demands and R&D tax credit disputes. Connor also helps prepare detailed evidence and submissions for use in appeals and settlement negotiations, ensuring cases are presented clearly and effectively.

Andy Lynch at FWJ was literally a life saver for me. I ran in to some tax issues with HMRC and I suffer from mental health issues as well so I was a complex case. Andy took his time to professionally and accurately layout my case and assist me with finding a resolution. I researched a lot of tax advisers before making my decision and I am glad I did and relieved that I chose Andy and FWJ.

Chris Kitchen

“FWJ did precisely what it set out to do. I am extremely grateful for its assistance.”

A client who had received a Request for Security from HMRC for a sum that would have caused their company severe financial difficulties. We helped them to have the entire bill withdrawn

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At Francis Wilks & Jones we have considerable experience of assisting directors and business owners with threats of investigation by HMRC. We deal with all types of claims and schemes and their potential liability, particularly with regard to claims arising out of insolvency or claims for breach of a director’s fiduciary duties. Whatever your enquiry, our tax disputes team can help.